Now that the successful Cash for Clunkers program has run its course, the auto industry is wondering how bad the hangover will be.
It was clear from the start that the program successfully encouraged customers to make deals in auto showrooms and the Department of Transportation now calculates that the $3 billion program generated about 700,000 new car sales. Enthusiasm for the rebates ”“ up to $4,500 per vehicle ”“ increased traffic in dealers’ showrooms to levels not seen for more than a year.
Analysts fear that the program may have tapped out consumer demand for months to come, and that may well be true. But economic forecasting is not an exact science, and there are reasons to be hopeful that fall sales will be better than expected. For one thing, many customers who visited dealers weren’t able to make a deal, and there’s a good chance they’re still interested in buying.
There’s also a general perception that the economy is slowly swinging toward recovery. The Clunkers program ”“ officially known as the Car Allowance Rebate System ”“ seems to have played a role in the turnaround. Due to increased sales and reduced inventories, automakers including Ford and General Motors have announced increases in their North American production, putting more people to work building fuel-efficient vehicles.
This could lead to the kind of consumer confidence the auto industry depends on. The midsummer Clunkers promotion was preceded by many months of stagnant sales. Some analysts suspect that there is still strong pent-up demand for new cars.
Finally, automakers and dealers are used to dealing with ebbs and surges in consumer demand, and it’s likely we’ll see some strategies and incentives aimed at boosting sales.
In assessing the success of the program, it should be noted that it provided help beyond the auto industry. The vehicle-buying surge provided a boost to banks and other lenders, and it buoyed excise and sales tax revenue for states and municipalities. It also provided excellent deals for some consumers and got some gas guzzlers off the roads for good. For the record, the leading clunkers included the Ford Explorer, Ford F-150 Pickup and Jeep Grand Cherokee.
For the majority of motorists, still driving their basic transportation, it may be hard to get past the realization that a lot of other people were handed a good deal by the government. Everyone will be keeping track of how this experiment turns out.
The Cash for Clunkers program will eventually yield data that will be analyzed by economists and marketers for years to come. Stay tuned for their verdict: Was it a waste of money or a well-timed investment?
— Questions? Comments? Contact Kristen Schulze Muszynski or Nick Cowenhoven at 282-1535 or kristenm@journaltribune.com or nickc@journaltribune.com.
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